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Ackman Folds

Tyler Durden's picture





 

29 months after ramping his initial stake to over 39 million shares (and witnessing a collapse of the stock from Over $40 to under $13), Ackman has decided that enough is enough. Through a just filed Citi-sole managed prospectus, Pershing Square is set to sell his entire 39,075,771 share stake in the beleaguered firm. The stock price's initial plunge on the news was immediately met by an avalanche of algo-driven buying to enable those that can to escape quick but as we post, JCP is heading back to its lows. With an overall cost-basis in the mid $20s, this one will sting a bit.

 

With today's VWAP at $13.34, we suspect Citi (the selling agent) will be looking to maintain the price as close as algorithmically possible...

From the press release:

Pershing Square Capital Management, L.P., on behalf of its investment funds (the "Selling Stockholders"), announced today the underwritten offering of 39,075,771 shares of J.C. Penney Company, Inc. (NYSE: JCP)  common stock owned by them. J.C. Penney will not receive any proceeds  from the sale of the shares by the Selling Stockholders in this  offering.

 

The offering will be made under J.C. Penney’s registration statement on Form S-3 filed with the Securities and Exchange Commission. Citigroup is acting as sole bookrunning manager and underwriter for the offering.

Contrary to some confused reporting by CNBC, this means the stock has not been presold, and that Citi will proceed like any normal secondary/follow on offering whereby it has to sell the stock in the distressed retailer at a substantial discount (5? 15%? 25%?) to prevailing prices.

More importantly, margin clerks will no longer recognize JCP stock as collateral and this may in turn force Ackman to cover his short Herbalife position faster than he may have otherwise wanted.

 


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